In 1996, Hurricane Fran hit Raleigh, knocking out power and trees. Duke Political Science Professor Michael Munger describes the response of several citizens from a neighboring town who decided to exploit the situation. These budding opportunist entrepreneurs rented some refrigerated trucks, filled them with ice and drove to Raleigh, where they sold the bags of ice for about $8 each. Raleigh police eventually arrived, arrested them for price gouging, and allowed the ice to melt with virtually none distributed to the locals.
This post stems initially from the AEI blog about organ donations. Libertarians like to embrace controversial subjects and use purely applied economics in situations that we wouldn’t normally think they should apply. The use of compensation for organ donations makes great sense economically but it is definitely controversial, so let’s analyze it.
Before we get into the moral questions, let’s look at if this would even be effective economically. There was a famous 1970 study that found blood donations actually dropped when people were compensated, since many were really compensated by the good feeling they got from helping others. When they were compensated, they lost that sense of charity and didn’t feel like donating any more. The Freakanomics blog however found that in later studies, if donors were compensated with a more subtle gift than direct cash, say a gift card, donations actually did increase. The human mind is not necessarily economically rational, but it does respond to incentives. I think it’s certainly possible organ donations could be monetized and have good results (i.e. increasing the number of organs available).
But let’s talk about morality, which is probably the real problem everyone has with this situation. Paying people to donate organs just feels wrong. Most non-economic minded people hate the concept of putting a price on human life of any kind, and this is no different. Remember all those stories of outrage whenever a government body places a numerical value on human life? Sure I think the government is inefficient, and there’s no reason to believe their static calculation is accurate, but it’s naive to believe certain things are unable to be valued.
While I may not agree with people who have these gut reactions to organ payments, the political reality is that most Americans won’t like this idea either. Nevertheless, I must emphasize that (assuming economic incentives work as we think they do, see previous paragraphs) their moral smugness is purchased at the expense of people’s lives and well-being. This is fascinating! People opposed to organ payments imagine that they are actively taking the high road against greedy opportunists. But in reality, they are actually depriving people who need organs of another way to get them.
Our ultimate goal here is purely utilitarian. How do we reduce organ shortages? Does everyone need 2 kidneys? Well, no. Can we more efficiently allocate these resources to increase everyone’s well-being? In other words, the current situation is not a Pareto Optimum–everyone’s welfare could be improved by allowing these transactions to occur. Anyone opposed is actually advocating for everyone else to be worse off so that they will feel morally superior.
But there is a final important point, something that often comes up when discussing libertarian economics. What about the poor person forced to sell their kidney for food? Is this really a voluntary transaction? It’s the same with prostitution–what about the poor woman with no income who is forced to sell her body just to eat? What about the unskilled laborer who is forced to work at a terrible job for less than minimum wage (this argument is used to advocate for the minimum wage). In some sense, it seems terribly clear to non-libertarians that these exchanges are not voluntary, since there really isn’t a good alternative for these economic actors.
This concept is better understood in reference to Munger’s idea of euvoluntary (or truly-voluntary) exchange. A euvoluntary exchange occurs when there are good alternatives. For example, when buying a car or ice cream one could always just go to a vendor across the street. But buying water in the middle of the desert for very high prices when there is no one else around is not euvoluntary, but merely voluntary. This is because it may be very difficult to bring water out to the desert, so it’s not unjust for a man to sell water for high prices in the desert. But clearly this exchange is like the poor man who must sell his kidney and not analogous to buying an ice cream cone. But as Munger says, even voluntary transactions are just, as they usually reflect a pre-existing problem of inequality which has nothing to do with the transaction. Again, the transaction makes everyone better off, so banning it helps no one.
Moreover, if this was a real policy, there would most likely be a great deal of restrictions. More importantly, there are real restrictions that would be put in place by hospitals, not just governments. Anyone malnourished or in poor health would not meet the health requirements needed for the surgery to sell a kidney.
Looking at financial and background analysis of the donor might also uncover that the patient is unfit to care for themselves or their recovery. They would either be denied or offered facilities to recover in as part of the compensation, removing more of the risk of exploitation.
Another restriction that could be instituted by governments would be a delay of the monetary compensation for a period of time. This eliminates immediate payouts, meaning only those with means carry on for a period of time would be able to participate.
People who are against the selling of organs offer a false choice of letting poor people sell their kidneys to survive vs have compassion and stopping this exploitation from occurring. The choice really is between letting already-poor people, along with everyone else have another option open to them, and at the same time saving many lives, and on the other hand letting those poor people continue to be poor and allowing those with kidney problems to stay on dialysis or possibly die while they wait for a kidney.